Forest Lambastes Icahn in Proxy-Fight Letter

Forest Laboratories (NYS: FRX) got up on its soapbox today in an electioneering letter to shareholders. In the midst of a proxy fight with Carl Icahn & Co., Forest pleaded with shareholders to vote for its board nominees, rather than those put forward by Icahn's investment group. The letter was liberally sprinkled with bold-faced type, underlining and a few words in all caps, all aimed at Icahn, his nominees and anyone who might suggest that CEO Howard Solomon should be excluded from doing business with the federal government.

The company ticked off its achievements -- as well as Solomon's -- strong results for the most recent quarter, including an 8.2% increase in net sales; five new products launched since 2008; an above-average ratio of sales per employee; pipeline drugs expected to boost sales and earnings by 10% to 30% annually; and a 23% annualized return for investors over Solomon's 34-year tenure.

But Icahn's name and strategies featured prominently, often in boldfaced type. The letter accused the activist shareholder of hijacking the board election, saying that boards shouldn't be assembled out of "the obvious self-interest of a single vocal shareholder...who NEVER once approached the Company or engaged in ANY dialogue with Forest management or directors." It said Icahn has no ideas for improving the company, only criticisms.

And last but not least, the letter claimed Solomon's potential exclusion by the Department of Health and Human Services won't, in fact, affect the company's ability to sell drugs to Medicare, Medicaid, et al. Not only because the exclusion move is "arbitrary and unwarranted" and would exceed HHS's authority to boot, if it actually goes through. But also because, "should the exclusion become effective," Forest would "take the appropriate steps" to make sure the company can still do business with the U.S. government. Sounds like a pledge to bid Solomon goodbye if the HHS inspector general does its worst.

Icahn's group has sued Forest for more information about the move against Solomon. The company's letter takes umbrage at Icahn's "attacking our CEO" out of "desperation." We're likely to find out whose side Forest shareholders take in this fight before the feds decide one way or the other about Solomon; the meeting is scheduled for Aug. 18.

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